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ITT Educational Services (ESI) Is Today's Dead Cat Bounce Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified ITT Educational Services ( ESI) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified ITT Educational Services as such a stock due to the following factors:

  • ESI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.9 million.
  • ESI has traded 52,844 shares today.
  • ESI is up 3.5% today.
  • ESI was down 21.1% yesterday.

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More details on ESI:

ITT Educational Services, Inc. provides postsecondary degree programs in the United States. ESI has a PE ratio of 14.9. Currently there are 4 analysts that rate ITT Educational Services a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for ITT Educational Services has been 422,000 shares per day over the past 30 days. ITT Educational Services has a market cap of $925.4 million and is part of the services sector and diversified services industry. The stock has a beta of 1.75 and a short float of 83.6% with 8.05 days to cover. Shares are up 11.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ITT Educational Services as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:

  • Compared to its closing price of one year ago, ESI's share price has jumped by 208.31%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • ESI's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for ITT EDUCATIONAL SERVICES INC is rather high; currently it is at 55.35%. Regardless of ESI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ESI's net profit margin of 7.30% compares favorably to the industry average.
  • The change in net income from the same quarter one year ago has exceeded that of the Diversified Consumer Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 55.8% when compared to the same quarter one year ago, falling from $42.86 million to $18.94 million.
  • ITT EDUCATIONAL SERVICES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ITT EDUCATIONAL SERVICES INC reported lower earnings of $5.76 versus $11.11 in the prior year. For the next year, the market is expecting a contraction of 28.7% in earnings ($4.11 versus $5.76).

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